A quick glance at the Moneyfacts best buy savings rate tables shows that Al Rayan Bank’s one year fixed-rate bond pays a stunning 6.01 percent via savings platform Raisin UK.
Al Rayan is an unfamiliar name but money up to £85,000 saved in this account benefits from full Financial Services Compensation Scheme protection.
It won’t be for everybody but its market leading rate is almost matched by standard lender OakNorth Bank, which pays 5.93 percent over the same period.
For those willing to lock up their money for two years, OakNorth pays 5.92 percent a year or 5.86 percent a year for three years.
These are brilliant rates, but millions many of us are squandering this opportunity to make our money work harder.
One in three Britons is failing to cash in on soaring savings rates because they are leaving money in current accounts paying little or no interest instead, losing on average £619 a year.
In total, they could have got £8billion more, according to the new analysis from challenger bank Atom.
Savers’ losses are growing as Barclays, Lloyds, HSBC and NatWest come under fire for failing to offer longstanding customers a fair deal.
Millions also lose out by leaving cash in high street easy access savings accounts, which pay just 0.97 percent on average.
By shopping around they could get 4.35 percent on easy access from today’s market leader Yorkshire Building Society.
App-based Chip’s instant access account pays 4.21 percent.
In marked contrast, Barclays Everyday Saver pays just one percent, and it’s not the worst offender.
Halifax Everyday Saver pays 0.95 percent, Lloyds Bank Easy Saver pays 0.9 percent and Santander Easy Saver pays just 0.85 percent.
Someone who saved £10,000 into Santander’s account would only earn £85 over one year compared to £601 if they shifted it to the Raisin platform.
Worse, with inflation at 8.7 percent, money left with Santander for a year would be worth £722 less in real terms.
The big banks continue to line their coffers by paying dismal savings rates, despite a growing storm of criticism.
Atom’s analysis shows that the big five banks posted combined profits of over £5billion in the first quarter of this year, up 43 percent on last year, as they increase margins at the expense of savers.
Savers are finally starting to vote with their feet, pulling £22billion of deposits over the past year.
And about time, too.
READ MORE: UK banks still paying less than 1 percent interest in worst savings rates
Atom chief executive Mark Mullen said while current account customers may feel they are getting a free service, they pay a hidden cost due to poor interest rates. “Their business models rely on customer inertia and keeping those customers’ savings in current accounts paying well below one percent.”
Savers can switch to lesser-known banks with confidence as the first £85,000 is fully protected under the FSCS.
Leaving money in current accounts exposes it to the full force of inflation, said Adam Thrower, head of savings at Shawbrook Bank. “It makes little sense when there are numerous competitive savings accounts available.”
Someone with £20,000 in a standard current account might earn £200 a year at best in a current account, and possibly much less, Thrower said. “The same sum in a market-leading one-year fixed rate Isa could earn 4.63 percent, generating interest of £926 a year instead.”
Savers can get more outside of an Isa, with one-year fixed rate bonds from Atom, Tandem Bank and United Trust Bank all paying 5.85 percent a year, generating £1,170 from a £20,000 deposit.
United Trust Bank pays a fixed rate of 5.90 percent for two years, worth £2,360 to those who can lock their money away for two years.
The big banks will never be on your side. Don’t play their game by leaving excess funds in their accounts when it could work harder else.
